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I wish there were a bit more explanation provided on this paragraph: > "Most are backed on a one-to-one basis by mainstream assets like the U.S. dollar, while
by krisrm 7y ago
I wish there were a bit more explanation provided on this paragraph:
> "Most are backed on a one-to-one basis by mainstream assets like the U.S. dollar, while others are collateralized by baskets of cryptocurrencies. Some use algorithms to maintain stable values."
Particularly the last two statements about "baskets of cryptocurrencies" and algorithms. I've only got a basic understanding of how cryptocurrencies work, does someone with a better understanding know what they're referring to here, and how backing with other crypto currencies would prevent speculation from massively inflating/deflating a so called "stable" cryptocurrency?
- wmf 7y agoThere are several projects exploring different algorithms for managing crypto-collateralized stablecoins; they all involve fairly complex feedback loops. MakerDAO aka Dai is the most prominent one and quite a bit has been written about it. https://medium.com/makerdao/stablecoins-collateralization-types-2a860624dcd3 https://medium.com/makerdao/stablecoins-collateralization-ty... https://medium.com/reserve-currency/our-analysis-of-the-makerdao-protocol-4a9872c1a824 https://medium.com/reserve-currency/our-analysis-of-the-make... https://prestonbyrne.com/2018/01/11/epicaricacy/ https://prestonbyrne.com/2018/01/11/epicaricacy/ https://cointelegraph.com/news/dai-has-been-struggling-to-maintain-its-1-peg-but-the-makerdao-community-believes-it-will-soon-be-cryptos-default-stablecoin https://cointelegraph.com/news/dai-has-been-struggling-to-ma...